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The Light Duty Liquid Detergents (Ldl) Market

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I. Executive Summary

Chris Wright, associate advertising manager of Packaged Soaps and Detergents (PS&D) division at Procter and Gamble (P&G) needs to evaluate how to increase the volume of its light duty liquid (LDLs). 3 alternatives for volume growth are considered for analysis based on the market segment (price/ performance/ mildness): (1) introduction of a new brand, (2) product improvement of an existing brand and/or (3) increased marketing expenditures on existing brands. Ultimately he must make recommendations on the above. The problem facing PS&D is how to retain its dominant competitive position while at the same time increase volume share and profits.

II. Introduction

The Light Duty Liquid Detergents (LDL) Market:

For the year 1981, the total market sales for LDL have been $850 million and volume of 59 million cases. The most popular sizes are the 32 oz and 22 oz. LDLs have penetrated 90% of the US households and expected to grow to 92% by 1990 . The market is witnessing saturation in the growth for LDLs. The sales of LDLs have been affected by the penetration of automatic dishwashers; the detergents for this market have doubled in the last 10 years indicating the increase in daily use of dishwashers

The LDL market is divided into 3 major segments: (1) the performance brands which provide better cleaning benefits (35% volume/42% sales), (2) the mildness segment which are gentle to the hand (37% volume/ 44% sales) and (3) the price segment which are primarily low cost with no brand loyalty (28% volume/14% sales) . The LDL market is relatively stable with the introduction of a new brand every 2Ð'Ð... years and an average of 2 price brands introduced and discontinued per year. P&G has 42% market share, followed by Colgate-Palmolive with a 24% share and Unilever with a 7% market share. The remaining 27% market is mainly generic and private labels.

P&G LDL Products

In the LDL segment P&G manufactures 3 products, Joy and Dawn in the performance segment and Ivory in the mildness segment. Joy had sales of $141 million (40% segment sales share), Dawn had sales of $164 million (47% segment sales share) and Ivory has had sales of $181 million (49% segment share) for the year. Overall P&G has a 57% share in the $850 million LDL market. P&G does not manufacture any products in the price segment.

III. Analysis

In this section segment based analysis will be provided and the following 3 options analyzed:

• Introduction of a new brand

• Product improvement on an existing brand.

• Increase marketing expenditure on an existing brand.

Price Segment:

The price segment is projected to remain stable over the next 5 years. The total sales in this segment are expected to top off at $132 million by 1986. Currently, P&G does not offer a product in this segment. The market is fragmented in this segment. Consumers are least loyal to the brand and are price sensitive. Entering this segment will drastically affect the marketing budgets and profits. Assuming that a product was developed for this segment and it can capture 20% of this segment the sales would top off at $26 million, resulting in profits and marketing budget of $3.6million calculated based on initial interaction with PDD which estimated profits and marketing expense at 14%. To develop this product $20million in capital investment for increasing production capacity and bottle molds will be required. A marketing budget of $5 million will also be required.

Performance Segment:

P&G dominates this segment with a 87% revenue share (revenues are $306 million). Consumers have spent approximately $353 million in this segment. Following factors need to be considered in addressing this segment:

1) Competitive threat: The introduction of Sunlight (Unilever) brand that has captured 10% market in Phoenix (test market) the competition will increase in the national market. Sunlight success can be attributed to its being a new product.

2) Joy brand eager to restage the brand with new “no-spot” formula. This would reduce its COGS by $3 million.

3) New product introduction in this market will result in cannibalization of customers from Joy and Dawn in this segment.

4) Development of a new technology for a high performance product. The formula called H-80, combined suspended non abrasive scrubbers with highly effective detergent system provides superior cleaning versus other LDLs

5) The industry average per caseload is $17.5; P&G commands $19.8 per caseload for all its products.

In light of the competitive threat, the focus in this segment should be to maintain and gain market share. Introducing a new product in this segment is likely to lead to cannibalization of consumers from the Joy and Dawn brands. With the success of Sunlight in the Phoenix market the segment should be monitored closely not to loose any market share. Marketing promotions (coupons, bundling pads with LDL, targeted commercials) should be made to reduce the competitive threat. Introduction of a third

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